Freddie Mac sues BofA, UBS, JPMorgan alleging Libor rigging

Freddie Mac sued Bank of America Corp., UBS AG, JPMorgan Chase & Co. and a dozen other banks over alleged manipulation of the London interbank offered rate, saying the mortgage financier suffered substantial losses as a result of the companies’ conduct.

Government-owned Freddie Mac accuses the banks of acting collectively to hold down the U.S. dollar Libor to “hide their institutions’ financial problems and boost their profits,” according to a complaint filed in federal court in Alexandria, Virginia.

“Defendants’ fraudulent and collusive conduct caused USD LIBOR to be published at rates that were false, dishonest, and artificially low,” Richard Leveridge, a lawyer for Freddie Mac, said in the complaint, which was made public yesterday.

Manipulation of interest rates by some of the world’s biggest banks has spawned probes by half a dozen agencies on three continents in what has become the industry’s largest and longest-running scandal. More than $300 trillion of loans, mortgages, financial products and contracts are linked to Libor.

Libor is calculated by a poll carried out daily by Thomson Reuters Corp. on behalf of the British Bankers’ Association, an industry lobby group that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies.

Dozen Banks

The complaint lists 15 banks as defendants as well as the British Bankers’ Association. They include Citigroup Inc., Barclays Plc, Royal Bank of Scotland Group Plc, the Royal Bank of Canada, Deutsche Bank AG and Credit Suisse Group AG.

Freddie Mac accuses the banks of fraud, violations of antitrust law and breach of contract. The housing financier is seeking unspecified damages for financial harm, as well as punitive damages and treble damages for violations of the Sherman Act.

“To the extent that defendants used false and dishonest USD LIBOR submissions to bolster their respective reputations, they artificially increased their ability to charge higher underwriting fees and obtain higher offering prices for financial products to the detriment of Freddie Mac and other consumers,” the U.S.-owned company said in the complaint.